E-mini S&P (December)
Yesterday’s close: Settled at 3036.25, up 16.00
Fundamentals: It was a strong start to the week with all four major U.S benchmarks gaining at least 0.5%. The ES and NQ each set fresh record highs and the board is stable ahead of the bell. Earnings remain in the spotlight, Alphabet missed EPS expectations after the close yesterday but did beat on revenue. The company cited rising costs as it expands its cloud business, but the report was overall not that bad. The stock lost nearly 5% on the headline release but is down only 1.5% ahead of the open. Amid a deluge of releases this morning, two Dow pharmaceutical companies stand out; Pfizer and Merck each handily beat estimates and the stocks are up more than 2.5% premarket. BP is the dog, down more than 2% after net profits fell 41% when compared to a year earlier. The company cited weak oil prices among other factors. Boeing will be in the news today at CEO Muilenburg begins a two-day Congressional testimony. Mondelez, AMD and others report after the bell.
On the U.S and China trade front, Reuters reported China’s Vice Commerce Minister as saying they will eliminate restrictions on foreign investment and won’t force technology transfers of foreign companies. For face value, this is encouraging news, but markets either don’t trust the comments or already priced in the impact of an interim deal (outside of the final knee-jerk).
The economic calendar picks up today and stays busy through the end of the week. Case Shiller Home Price Index is due at 8:00 am CT, Consumer Confidence and Pending Home Sales are due at 9:00 am CT. Tomorrow, we look at various inflation and confidence reads from Europe before the U.S private ADP Payroll Survey and the first look at Q3 GDP data. The Bank of Canada meets tomorrow morning and the Federal Reserve is expected to cut rates by 25 basis points in the afternoon.
Technicals: Price action is holding ground very well, but to play devil’s advocate let’s find two things to be negative about. First, our breakout targets of 3046.50-3057.75 in the S&P and 8150-8179.25 in the NQ were essentially achieved yesterday. Also, each index is below our momentum indicator which happens to align closely with settlement and comes in as first key resistance for each. When price action is below our momentum indicator it can mean the tape is exhausted in the near term. However, as you may have noticed, dull overnight action can typically allow the momentum indicator to overshoot the tape. We now must see price action steadily trade out above 3035.50-3036.25 in the S&P and 8094.75-8100 in the NQ within that first hour in order to reinvigorate yesterday’s strength. First support is major three-star levels and align Friday’s settlement with yesterday’s low. First tests here should bring a tremendous buying opportunity, however, traders do not want to see a decisive move through here on strong volume; this would open the door to an ugly reversal. ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each morning
Resistance: 3035.50-3036.25**, 3046.50-3057.75***
Support: 3020.25-3022.75***, 3008.50**, 2998.50**, 2984.75-2988.25***
Resistance: 8094.75-8100**, 8127.50**, 8150-8179.25***
Support: 8035.75-8048***, 7994.75*, 7948.25-7959.75**, 7901.50-7918.50***
Crude Oil (December)
Yesterday’s close: Settled at 55.81, down 0.85
Fundamentals: Crude Oil and the energy sector are at an inflection point. Have we seen peak pessimism on global growth? There are a number of economic indicators this week either supporting or denying claims that global growth is still deteriorating. The first look at U.S Q3 GDP is out Wednesday morning, Chinese Manufacturing is due that evening and U.S ISM Manufacturing is due Friday along with Nonfarm Payrolls. Amid pessimism, according to the CFTC Commitment of Traders, Managed Money shorts more than tripled over the last month. Although traders are still net-long, shorts are the largest since January. Simply put, if everyone has sold, who is left to sell. Every rally starts with a short cover and last week’s bullish EIA data was a turning point. The product inventories (Gasoline and Distillates) have been continually drawn down over the last month as refineries were in a maintenance season. This now becomes a bullish factor as throughput is expected to increase creating a larger demand for Crude. But without any change on the global growth front, we see this being more of a non-factor at the $56 area whereas it would have a larger impact at $52.
U.S-China trade and OPEC+ jawboning have both added a tailwind. We don’t expect an interim trade deal to lift growth prospects and envision a buy the rumor, sell the fact. Also, we also don’t imagine OPEC+ cutting production with Brent above $60. Brent finished at 61.57 on Monday. Saudi Arabia continues to insist they are ready to make deeper cuts, making headlines again early this morning. Still, Russia is holding ground reiterating it is too early to commit to any measures. Remember, the Saudi Aramco IPO is December 4th and the OPEC meeting is December 5th. Saudi Arabia wants to do its best to keep the market stable in order to get its payday.
Earnings from Exxon and Chevron are out Friday morning. Exxon did the sector a favor a month ago by issuing a profit warning. This threw ice cold water over already low expectations and the stock fell 5% over two days. Price action has since pared a good chunk of those losses. Furthermore, lowering the bar here opens the door for a near-term boost in price on not so bad results. The bottom line here is weak Crude prices, soft demand and tight margins have eroded these company’s balance sheets. Both Exxon and Chevron are expected to report sharp drops in revenue and earnings from a year ago. CVX EPS $1.49, XOM EPS 0.67. BP released earnings this morning and it fell right in-line with our narrative. Net-profit fell 41% and the company cited weaker oil prices among other factors; the stock is down more than 2% premarket.
Technicals: Price action failed to hold ground near last week’s close, and this quickly encouraged selling from both the bull and bear camps. The tape is now below our momentum indicators which aligns closely with yesterday’s settlement and is nearing major three-star support at 54.61-54.99; a close below here is very bearish. The largest technical theme across the board is the 200-day moving average. Crude tested and failed here Monday. While Chevron is closing in on its, Exxon is nearly 10% from the 200-day moving average. Compare this to the S&P 500 setting a record high and trading more than 5% above its 200-day moving average there is undoubtedly better places to be invested. As mentioned, the sector is at an inflection point and if neither Crude nor Chevron can finish above their 200-day moving averages, I believe there will be fresh waves of selling around the corner. Upon such, I’m targeting crucial levels of support below; $48 for Crude Oil, $108 for Chevron and $65 for Exxon. From there, if these levels are broken it could get very ugly. While using this near-term rally in Crude to position short, I’d like to do the same post-earnings with Exxon and Chevron.
Resistance: 55.72-55.81**, 56.80-56.82***, 57.08-57.19**, 58.22**, 59.11***
Support: 54.61-54.99***, 53.62-53.90**, 52.46-52.73***
Yesterday’s close: Settled at 1495.8, down 9.5
Fundamentals: U.S equity markets achieved fresh record highs yesterday and there is no doubt this is hampering Gold’s near-term case. In the more intermediate-term, the Fed is expected to cut rates tomorrow but with the move already priced-in, their rhetoric about further cuts is what will be most crucial. Still, it’s important to remember the economic data has yet to turn a corner and this week’s deluge beginning with U.S Q3 GDP tomorrow followed by Chinese Manufacturing will be absolutely pivotal. Today, we see Case Shiller Home Price Index at 8:00 am CT, Consumer Confidence and Pending Home Sales are due at 9:00 am CT.
Technicals: Gold is losing ground again this morning and testing into a large pocket of major three-star support that aligns multiple technical indicators at 1484.5-1491. If price action closes below here, it could get ugly and we may see Gold trade down to 1450-1454 quickly. Still, there is a lot of support in this region and the bulls have only gotten spooked once, on September 30th.
Resistance: 1509-1515.6***, 1527.5***, 1540-1543.3***
Support: 1484.5-1491***, 1465**, 1450-1454***, 1413.2***